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WASHINGTON TRUST BANCORP INC (WASH)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered solid sequential improvement: net income rose to $13.2M ($0.68 diluted EPS) from $12.2M ($0.63) in Q1; NIM expanded 7 bps to 2.36% as funding costs eased and mix improved .
  • Against S&P Global consensus, EPS beat by ~$0.05 ($0.68 vs $0.63*), while revenue was a slight miss ($53.7M* vs $54.1M*); management expects only “a couple bps” more NIM expansion in Q3 amid still-elevated deposit costs .
  • Fee engines improved: wealth management revenue up 2% QoQ with AUA up 5% to $7.18B (market gains offsetting net outflows), and mortgage banking revenue up 32% with $116.8M loans sold .
  • Credit metrics remain manageable: NPLs rose to 0.51% (one $9.4M C&I placed on nonaccrual), but ACL coverage of NPLs is 157% and net charge-offs fell to $0.65M; provision declined to $0.6M .
  • Strategic/catalyst items: dividend maintained at $0.56, in-market deposits +9% YoY, brokered deposits cut to $2M, FHLB up (balancing function); buybacks paused after a one-day $10K repurchase as the team prioritizes capital build .

What Went Well and What Went Wrong

What Went Well

  • Net interest margin and NII improved: NIM +7 bps to 2.36% and NII +2% QoQ to $37.2M, aided by 7 bps lower cost of interest-bearing liabilities (3.12%) and reduced wholesale funding balances .
  • Fee momentum: wealth management revenue +2% QoQ with AUA +5% QoQ to $7.18B; mortgage banking revenue +32% QoQ on $116.8M loans sold; swap income increased to $0.68M .
  • Management tone on NIM and deposit costs: “expecting a pretty modest expansion… maybe only a couple of basis points” and “we will aggressively reprice deposits down… if the Fed indeed does start to cut,” highlighting reduced liability sensitivity vs last fall .

What Went Wrong

  • Credit watch items: Nonaccruals rose to 0.51% of loans (from 0.42%) mainly due to a $9.4M C&I relationship moving to nonaccrual; management cited a broadband contractor bankruptcy within a syndicate exposure ($11M potential), with resolution expected at least partially this year .
  • Past dues ticked up to 0.27% of loans (from 0.20%); office CRE remains challenged—one Class B office resolved with a reasonable loss, another is 50% vacant and under watch .
  • Wealth AUA still experiences net outflows (13 consecutive quarters noted by an analyst); management is adding talent, finished a wealth core system conversion, and may pursue small, RI-focused wealth M&A to improve net flows .

Financial Results

Core results (GAAP)

MetricQ2 2024Q4 2024Q1 2025Q2 2025
Net Interest Income ($M)31.59 32.94 36.42 37.19
Noninterest Income ($M)16.66 (77.89) 22.64 17.08
Provision for Credit Losses ($M)0.50 1.00 1.20 0.60
Net Income ($M)10.82 (60.79) 12.18 13.25
Diluted EPS ($)0.63 (3.46) 0.63 0.68
Net Interest Margin %1.83% 1.95% 2.29% 2.36%
Efficiency Ratio %70.3% (76.3%) 71.4% 67.3%

Balance sheet and credit

MetricQ2 2024Q4 2024Q1 2025Q2 2025
Total Loans (End, $B)5.63 5.14 5.10 5.14
Total Deposits (End, $B)4.98 5.12 5.04 5.05
In‑Market Deposits (End, $B)4.64 4.82 5.01 5.04
FHLB Advances (End, $B)1.55 1.13 0.85 1.00
Nonaccrual Loans ($M)30.48 23.31 21.63 26.11
NPL / Loans %0.54% 0.45% 0.42% 0.51%
Past Due / Loans %0.21% 0.23% 0.20% 0.27%
ACL / Loans %0.75% 0.82% 0.81% 0.80%
Net Charge‑offs ($M)0.03 1.87 2.30 0.65

Fee & activity KPIs

MetricQ2 2024Q4 2024Q1 2025Q2 2025
Wealth Mgmt Revenues ($M)9.68 10.05 9.89 10.12
AUA (End, $B)6.80 7.08 6.82 7.18
Mortgage Banking Revenues ($M)2.76 2.85 2.30 3.03
Residential Loans Sold ($M)110.05 113.11 75.50 116.78

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest Margin (spot/near‑term)Q3 2025Not specified“Pretty modest expansion… only a couple of basis points” New qualitative color
Deposit costs sensitivity2H 2025Not specifiedLess liability sensitive than last fall; will reprice deposits down if Fed cuts, without triggering attrition New qualitative color
Effective Tax RateFY 2025~22.5% (prior comms)~22.4% (full‑year expectation) Maintained (slight refinement)
Share RepurchasesOngoingAuthorization in placePaused after single day (~$10K shares) to preserve capital Lowered activity
DividendQuarterly$0.56/share$0.56/share declared for Q2 2025 Maintained
De novo branchMid‑2026Not previously specifiedPlan to open 1 branch “middle of next year” New initiative

Earnings Call Themes & Trends

TopicPrevious Mentions (Q‑2 and Q‑1)Current Period (Q2 2025)Trend
NIM trajectory & funding costsQ4’24 NIM 1.95%; early benefits from December balance-sheet repositioning . Q1’25 NIM 2.29% with lower wholesale funding and improving asset yields .NIM 2.36%; expected only “a couple bps” further in Q3; deposit costs still elevated but peaking; less liability sensitive vs last fall .Improving but moderating
Deposit mix & liquidityBrokered time deposits $298M at Q4’24; down 91% to $27M by Q1’25; contingent liquidity ~$1.75B .Brokered deposits down to $2M; in‑market deposits +1% QoQ and +9% YoY; contingent liquidity $1.78B .Healthier/focused on core
Wealth AUA & strategyAUA 7.08B at Q4’24; 6.82B at Q1’25; net outflows persisted .AUA up to 7.18B on market gains; continued net outflows; added new wealth talent and completed core system conversion; exploring small RI wealth M&A .Productive but still outflows
Mortgage activityQ4’24–Q1’25 mortgage revenue ~2.8→2.3M; loans sold 113.1→75.5M .Revenue 3.03M; loans sold 116.8M; pipeline $102M; ~75–80% purchase; saleable mostly 30‑yr fixed; some 7/1 hybrid ARM to portfolio .Strengthening
Credit quality & office CREQ4’24 NPLs 0.45%; office CRE challenges, one large resolution; Q1’25 NPLs 0.42% .NPLs 0.51% on a $9.4M C&I moving to nonaccrual; ACL/NPL 157%; one Class B office resolved; another ~50% vacant; one lab build improving leasing .Mixed: manageable but watch list
Capital allocationQ4’24 raised ~$70.5M equity; focus on capital generation .Buyback paused to preserve capital after ~10K shares in a day; dividend maintained .Conservative stance

Management Commentary

  • “We realized growth in net interest income, wealth management revenue, and mortgage banking revenue, and we continued to build capital. This was a solid quarter with loan and deposit growth on target.” – CEO Ned Handy .
  • “For the third quarter… expecting a pretty modest expansion in the margin, maybe only a couple of basis points… we will aggressively reprice our deposits down… if the Fed indeed does start to cut.” – CFO Ron Ohsberg .
  • On wealth management strategy and net outflows: “We’ve added some talent… finished the conversion of our core wealth management system… small M&A activity primarily in the Rhode Island marketplace… There’s no silver bullet.” – CEO Ned Handy .
  • On credit uptick: “This is a potential $11 million exposure to a broadband infrastructure contractor… largest customer backed out… Chapter 11… we have appropriate specific reserves; expect at least partial resolution this year.” – Chief Risk Officer Bill Wray .
  • On capital return: “We actually did initiate [buybacks] for a single day and then decided that we’re more focused on operations… our capital’s fine, and we think we’d like to have a little bit more.” – CFO Ron Ohsberg .

Q&A Highlights

  • NIM outlook: Management expects only slight NIM expansion in Q3 given deposit cost dynamics and lower liability sensitivity than last fall; intention to reprice deposits lower if Fed cuts, managing attrition risk .
  • Mortgage mix and pipeline: ~75–80% purchase-driven; saleable mostly 30‑yr fixed; portfolio production largely 7/1 hybrid ARMs; pipeline $102M at June 30, up 7% QoQ .
  • Loan growth: Pipeline “close to $145M” with balanced C&I/CRE; management maintains low single‑digit growth for 2025 .
  • Credit specifics: C&I nonaccrual relates to a contractor bankruptcy; office CRE—one Class B resolved at a reasonable loss, another ~50% vacant and under watch; lab project leasing progressing (50%→62% with LOI to ~70%) .
  • Capital actions: One planned de novo branch in mid‑2026; buyback paused to support capital; small wealth M&A considered in RI .

Estimates Context

MetricQ4 2024Q1 2025Q2 2025
EPS – Consensus Mean ($)0.55*0.63*0.63*
EPS – Actual ($)0.59*0.61*0.68*
Revenue – Consensus Mean ($M)46.35*53.16*54.07*
Revenue – Actual ($M)(45.96)*57.87*53.66*

Notes: Values retrieved from S&P Global.*
Interpretation: Q2 2025 EPS beat ($0.05); revenue was a marginal miss ($0.4M). Q1 2025 had a revenue beat vs a low base, and Q4 2024 S&P “actual revenue” reflects GAAP losses in noninterest income that quarter.

Key Takeaways for Investors

  • EPS beat with modest NIM tailwind: sequential NIM expansion and disciplined funding lowered cost of interest‑bearing liabilities; management guides only slight further NIM gains near term .
  • Core deposit strength and liquidity: in‑market deposits +9% YoY; brokered deposits down to $2M; contingent liquidity at $1.78B (165% of uninsured excl. preferred) underpin funding resilience .
  • Fees re‑accelerate: wealth revenues and AUA benefited from markets; mortgage revenues up 32% QoQ on higher sales into the secondary market—helpful to offset NII constraints .
  • Credit manageable but watch list matters: higher NPLs driven by a single C&I case; office CRE still mixed; strong ACL/NPL coverage (157%) and lower net charge‑offs mitigate risk .
  • Capital return conservative: dividend maintained; buyback paused to build capital—signals prudence while credit and margin trajectory solidify .
  • Near‑term trading lens: EPS beat vs slight revenue miss and cautious NIM guide may temper upside; stock likely most sensitive to deposit repricing pace, fee trajectory, and credit headlines (C&I resolution, office CRE updates) .
  • Medium‑term thesis: Ongoing pivot to core deposits, gradual NIM normalization, and fee growth (wealth + mortgage) can drive ROE improvement; small wealth M&A and de novo branch add optionality .

Additional Detail and Cross-References

  • Press release highlights include NIM 2.36%, provision $0.6M, wealth revenue +2% QoQ, mortgage revenue +32% QoQ, loans +1% QoQ, in‑market deposits +1% QoQ/+9% YoY, and dividend $0.56/share .
  • Income statement and ratios confirm improved NIM and efficiency (67.3%) and diluted EPS $0.68 for Q2 2025; prior-year comps included for trajectory .
  • Credit tables show NPL ratio 0.51%, PD ratio 0.27%, ACL/loans 0.80%, ACL/NPL 157%; net charge‑offs $0.65M in Q2 vs $2.30M in Q1 .

All document-based figures are cited above. EPS/revenue consensus and S&P “actual” values are marked with an asterisk and were retrieved from S&P Global.*